Multi-Entity Consolidation: Why Growing Businesses Need It

Your small business is growing into a multi-entity business, with more locations and subsidiaries. Soon, you’ll need to stop looking at each entity separately and start understanding how the group is performing as a whole.

That’s where reporting can get harder. Right now, you’re working with separate sets of financials, different systems, and no single view of the bigger picture. And when you’re running a lean team without a dedicated finance team, no one can absorb the extra work. Hiring also isn’t always an option.

At this point, multi-entity consolidation becomes relevant. Below, learn what it means, how it works, and when dedicated software can help.

What is multi-entity consolidation?

Multi-entity consolidation combines the financial results of two or more related businesses into a single, unified report. For multi-entity businesses, this approach lets them see and understand how the wider group is performing, a key to making business strategies.

For example, imagine owning three branches:

• Branch A generates $500,000 in revenue.
• Branch B generates $300,000 in revenue.
• Branch C generates $200,000 in revenue.

A consolidated report combines these branches’ revenue, costs, profit, and other financial results, so you see how the whole is doing. You see performance in one currency and format, giving you a clear “whole business” picture. In contrast, individual reports show each branch’s performance.

This “whole business” view matters when strategising for your entire business ecosystem. You can consolidate multi-entity data in two ways: manually, often through spreadsheets, or with dedicated software that automates the process.

4 signs your multi-entity business has outgrown its reporting process

Red flags include needing to copy-paste numbers between spreadsheets each month, not understanding your “whole business” performance, struggling with error-prone reporting, and your reporting cycles stretching longer than they should.

For lean teams, these warning signs often show up earlier than you might expect.

1. You're copy-pasting numbers between spreadsheets monthly

When each entity has its own financial reports, someone needs to bring those numbers together for you to see how the group is performing. For a lean team, that could look like downloading reports, copy-pasting figures into a master spreadsheet, and checking that everything lines up. It’s a manual, error-prone process that also eats up time your team could use for higher-value work.

2. You don't have one trusted view of the whole business

Your individual entity reports might be accurate, but they don’t tell you how the group is performing as a whole. So, you or the board have to open several reports, compare figures, and piece them together before you can answer how the business is performing as a whole. Fragmented reporting makes it harder to compare entities, spot group-level trends, or see how one part of the business is affecting another.

3. A spreadsheet error can affect the whole group

When you’re bringing figures from several entities into one spreadsheet, there are more places for something to go wrong. A formula might reference the wrong cell or a figure might get pasted incorrectly. One mistake can affect the totals and figures further down the report. As you add more entities, you have more numbers to check and more opportunities for errors to slip through.

4. Your reporting cycle keeps getting longer

The more entities you have, the more time it takes to pull together and check the numbers you need to see how the group is performing. What used to be a quick monthly task can turn into days of downloading reports, checking figures, updating spreadsheets, and chasing missing information.  By the time your numbers are ready, you have little time left to analyse them and use what they tell you.

Why growing businesses turn to consolidation software

Many growing businesses turn to consolidation software to manage increasing reporting workloads without relying solely on hiring more people. Currently, finance and accounting talent is in short supply, and businesses are hiring carefully. This makes improving the process, not just adding headcount, strategic.

With multi-entity consolidation software, growing businesses can automate repetitive work, freeing your lean team to focus on higher-value work. Automation means less manual work, less risk of manual errors, and more time to review results, investigate changes, and make decisions.

Some software doesn’t even require you to use the same system across all your entities. For example, Fathom can pull data from different accounting platforms to create consolidated multi-entity reports.

What happens during multi-entity consolidation

Multi-entity consolidation brings separate financial information together and adjusts it so you can view the group as a whole. The exact process depends on how your entities are structured, but it usually involves:  

1. Bringing entities together into one report

Financial results from each entity are brought into a single view, where you see combined revenue, costs, profit, and other important metrics. For example, Fathom consolidates multiple entities’ financial and non-financial KPI data, actual results, and budgets.

2. Intercompany eliminations

If companies within your group trade with each other, those activities get removed from your group results. Otherwise, it can make your group figures look higher than they really are. For example, Company A charged Company B $20,000 for management services. That $20,000 is revenue for Company A and an expense for Company B. For the group as a whole, the $20,000 hasn't been earned from outside the business. It's simply money moving from one entity to another, so you should remove it from the consolidated results.

3. Converting multiple currencies

If your entities operate in different currencies, their financial results have to be converted into a common reporting currency. This gives you a consistent basis for comparing entities and understanding the group's overall financial performance.  

4. Aligning accounts

Different entities may use different names for the same types of income or expenses. For example, one entity might record software subscriptions under “Technology”, while another uses “Software costs”. If these accounts aren’t aligned, it's harder to compare results across entities. You can then match the accounts so similar income and expenses are grouped consistently in the consolidated report.

5. Bringing group-level KPIs and budgets together

Once you combine the financial results, you can also view KPIs, budgets, and targets for the whole group in one place. This makes it easier to see how your whole business is performing against its goals, without checking each entity separately.

The benefits of consolidating your entities  

Consolidating your multi-entity business with tools like software can save time for higher-value work, reduce errors and audit risks, create one source of truth for the whole business, and build a scalable foundation for your multi-entity business.

1. Save time for higher-value work

Manual consolidation can take hours every reporting cycle. Meanwhile, Fathom users report saving an average of 14 hours per reporting cycle, compared with manual methods. Instead of downloading reports, copying figures, and updating spreadsheets each month, your team can spend more time reviewing results and planning.

2. Reduce spreadsheet errors and audit risks

Automated consolidation can reduce the number of spreadsheets, formulas, and manual steps involved in group reporting. This reduces the chance of copy-paste mistakes, outdated figures, or formula errors affecting your final report. It can also give your team a more consistent way to prepare and review group financials, making it easier to check the numbers before sharing reports.

3. Create one source of truth for the group

A consolidated view gives owners, boards, and other stakeholders a common set of group-level numbers to work from. So, rather than asking everyone to interpret several entity reports separately, you can start with the same overall picture, then drill into individual entities when something needs closer attention.

4. Create a reporting foundation that grows with you

Your reporting process shouldn't need to be rebuilt every time you add another entity. A consolidation approach can give you a structure that keeps working as your group adds companies, expands into new markets, or starts reporting in additional currencies. For example, Fathom can help you get up to 300 entities into a single-currency consolidated group, and up to 50 entities in a multi-currency consolidation.

How to get started with multi-entity consolidation

To get started with multi-entity consolidation, review your current reporting process, decide what you want to see at group level, and choose how you’ll bring the data together.  

A simple process looks like this:  

1. Map out current entities and how they report today

List the companies, locations, or brands you need to report on. Note which accounting systems they use, what reports they produce, and where information is currently transferred between systems or spreadsheets. This gives you a clearer picture of your biggest bottlenecks.

2. Agree on your chart of accounts approach

Look at how each entity categorises income, costs, and other financial information. Decide where accounts need to be aligned so the group-level numbers can be compared consistently.

3. Decide whether multi-currency applies

If your entities operate in different currencies, determine which currency you want to use for group reporting and how currency conversion should be handled.

4. Define what good group reporting looks like

Think about what you actually need from your consolidated reports. Do you want a group-level profit and loss? Actual-versus-budget reporting? Consolidated KPIs? Cash flow visibility? A board-ready management reporting? Figuring out what a good report looks like to you will help you build a consolidated system that can guide the decisions you really need to make.

Once you’ve done all these, choose how you want to bring your businesses together. If you want to reduce the manual work involved, Fathom’s Consolidated Reporting can give you a picture of how you can automate multi-entity consolidation.

For step-by-step guidance on setting up and managing consolidated groups, you can also explore the Fathom Consolidation Help Centre.

Final thoughts

For growing businesses managing multiple entities, success often requires gaining visibility into your whole business’s performance. With the right process and tools, you can consolidate your businesses’ financials and gain a reliable group-level view.  

This allows you to understand performance, spot changes, and decide next steps without going through multiple spreadsheets and separate reports.

Try Fathom today

Start a free trial to see how Fathom consolidates your financial reporting for multiple entities, as well as enables multi-entity financial analysis and cash flow forecasting.  

Learn how to turn complex financial data into a clear story of your multi-entity business.

Frequently asked questions (FAQs)

1. ‍What is the difference between multi-entity consolidation and multi-entity reporting?
   
   ‍Multi-entity reporting gives you financial information about several entities, often as separate reports. Multi-entity consolidation combines those results into a single group-level view and can include adjustments, such as intercompany eliminations and currency conversions.
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2. ‍Do small businesses need multi-entity consolidation?
   
   ‍Yes, if your small business operates more than one company, subsidiary, or other reporting entity and needs to understand performance across the group.
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3. ‍How do intercompany eliminations work?
   
   ‍Intercompany eliminations remove transactions between entities within the same group from the consolidated results. For example, if one company records a $10,000 management fee paid by another group company, the income and corresponding expense can be eliminated. This makes sure the group's results don't count the internal transaction as external business activity.
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4. ‍Can you consolidate entities that use different accounting systems?
   
   ‍Yes. Consolidation software like Fathom can bring together entities using different accounting systems. Fathom supports consolidation across platforms including Xero, QuickBooks, MYOB and Excel.
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5. ‍Can you consolidate companies that report in different currencies?
   
   ‍Yes. Consolidation software can convert results from entities reporting in different currencies into a common presentation currency. For example, Fathom supports multi-currency consolidations for up to 50 entities.